CNN Heroes of 2008

I had the opportunity to watch CNN’s Heroes of the year 2008. This being an American TV station it is hardly surprising that the viewers chose 7 Americans. One would have wished that their selection would reflect a little more of the international perspective of human suffering, not that those 7 Americans weren’t deserving of the praise. Three of them, in fact, do help people abroad. CNN, after all, is watched by more people outside the U. S. than inside.

The show as such was pretty much a normal Hollywood award show production with all its smoothness, the celebrities in low-cut dresses and high-heels, basically the format of an Oscar or Emmy awards presentation. Even the female heroes were decked out in Hollywood designer dresses with many a revealing neckline, one even in danger of revealing everything. The stars who presented the heroes are pretty much household names and they did a good job, as could be expected. We saw many in the audience wiping away tears from their eyes. The finale was a rousing rendition by John Legend with his song ‘If you are out there’.

Among the ten, however, was also a Cambodian woman, now living in Canada, by the name of Phymean Noun. Her story can be viewed on CNN’website at http://www.cnn.com/2008/WORLD/asiapcf/05/29/heroes.noun/



It goes without saying that her efforts are indeed heroic, not the least that she spent $30,000 of her own money to get her project started.

What bothered me in the presentation of her good work was that Cambodia was mentioned as a place in hell. Yes, I know when Lucy Lui said this she was referring to the dump sites, not to the country as a whole, but it nevertheless came across as just that. Maybe I am a little oversensitive here, but it left a sour aftertaste in my mouth. Of course, we know about these scavengers, and we know something must be done about that, and indeed are happy that someone feels called upon to actually act. But it still would have been better if at least a fleeting remark had been made about what Cambodia is today. I could imagine an opening line for the video like this:

‘Cambodia is one of the poorest countries on earth. Although it has made some progress in alleviating the plight of the poor, it still is not enough. Some people and their children can only carve out a meager living by scavenging the dump sites…..’

Recent News

After what seemed like an extended self-imposed period of silence Sam Rainsy is back. He recently spoke with the Voice of America Khmer edition returning from a private audience with the former King in Beijing. He deplored that the economy was bad – what else is new? – and blamed it on the world financial crisis – no, really? – and, of course, what would you expect, on bad governance. He was probably thinking of the $500 million the government could save by fighting corruption effectively. He also said people were protesting for solutions to their living and the coming months could lead to ‘turmoil’. What on earth was he thinking? Is he trying to incite a riot? Sam Rainsy, please stay quiet, it’s better. You can’t offer solutions; you can’t be constructive, so just shut up. Sorry, only fools still think you have a role to play in Cambodia.

The ban on marrying foreigners was lifted recently. As much as one can understand that the government wants to protect their poor, uneducated women, it nevertheless was a curtailment of civil rights to begin with. If two consenting adults decide to get married, it is not the government’s role to interfere. Just close down those marriage brokers. The law against human trafficking covers this trade adequately, doesn’t it?

But foreigners still need to apply at the Ministry of Foreign Affairs for permission to get married. Is the government the guardian of all Cambodian women now? Foreigners must also be present in Cambodia. What about if they get married abroad? The U. S. for instance provides for a fiancée visa so the bride can go to the U. S. to get married to her U. S. groom. Or a woman is able to obtain a tourist visa to another country, stays for 3 months and gets married there? Are they legally married under Cambodian law?

I mean, I know that this regulation existed even before that decree, but one would expect that they come up with something more imaginative than marriage permits issued by the government.

Good news – the first American-owned bank opened in Phnom Penh. Wow, they have a capital base of a whopping $13 million. Yes, that’s what Cambodia needed, another bank, and so well-financed too. What does ‘American-owned’ actually mean? That they manage your money better than everybody else? Sure, we see that with all those American banks that are basically bankrupt and are now crying for government help. If these people are as smart as the ones in the U. S., stay away from that bank. A serious investor with $13 million would look for other places to put his money. If you are looking for a short-term quick return, Cambodia is the wrong place to begin with.

And finally, although this concerns Cambodia only indirectly, perhaps directly if you look at the Preah Vihear problem, when will responsible people in Thailand see that those demonstrations are ruining their country? The commander of the armed forces has called upon the prime minister to hold new elections and the PAD to disperse. The PAD's reply was that even with new elections the problems wouldn’t go away. What? Yes, it is a well-known fact that the PPP bought votes in the last election, but it was not a close call with a difference of almost 5 million votes in their favor. What the PAD seemingly wants is a return to a full-fledged monarchy. It is rumored they even have some royal backing (according to news reports in the New York Times, no less). It will be some time before Thailand can get back on its feet thanks to the PAD. Never mind, the impact of the world financial crisis, never mind the disastrous state of the Thai economy now. What are they thinking? Not of the common people, that's for sure.

The Situation and Prospects of the Rubber Industry in Cambodia

Rubber trees during wintering season


Rubber plantation

The world financial crisis has without doubt dramatically impacted the important rubber producing segment of Cambodian agriculture. Cambodia had hoped to increase its output drastically in order to broaden its economic base from just three current mainstays – garments, tourism, and real estate/construction. As so often, a continuing increase in world rubber prices led decision and policy makers to believe that this segment held promising prospects for the future and propagated and encouraged in many speeches the cultivation of rubber trees.

Many a private real estate speculator, having made some money by selling a piece of land, turned to this industry and started a rubber plantation. One needs to take into account, though, that a plantation will not begin to produce latex until 5 to 6 years after planting the first seedlings. Neversteless, private investors are increasingly seeing natural rubber as a good business. They may now have developed some doubts, though, about their recent decisions to go into this industry.


Seedlings


Soy bean field to be replaced by rubber trees


Rubber tree seedlings

The mostly state-run rubber industry in Cambodia, plantations and processing plants, were or are in the process of being privatized. But estimates still put the state-run producing segment at 70%, whereas the worldwide average of privately-run operations is about 80%, most of them small-holder with sizes of less than 10 ha.

The current total acreage of trees older than 6 years is about 80,000 ha. The number was 70,000 ha in 2007 but in the meantime many new plantations have trees mature enough for tapping.The overall available acreage suitable for the cultivation of rubber trees due to appropriate soil properties is estimated to be up to 350,000 ha. Most of that area is located in Kompong Cham, Kompong Thom, and Rattanakiri provinces. But I have even seen plantations being started in Koh Kong province, formerly not considered ideal for rubber plantations.

Since it appears that all, but one, world-renowned economists, world-leaders, and other politicians did not foresee the economic collapse brought on by the irresponsible marketing of basically worthless securities and other financial instruments (derivatives), the leaders and politicians in Cambodia can hardly be blamed for their enthusiasm in promoting the cultivation of more diverse economic sectors such as rubber – rice, cassava, jatropha would be the other ones that come to mind. It stands to reason that a formerly significant rubber producing country would go back to its erstwhile core industry, especially in view of increasing worldwide demand caused by the emergence of China and India as great economic driving forces in the world. After all, these two countries contributed greatly to the exorbitant levels of oil prices until May this year.

Oftentimes, however, the most basic facts of commodity pricing are overlooked by even industry insiders. Commodities are cross-indexed, that is to say, several commodities rise and fall in tandem, like oil and rubber, or rise and fall in opposite direction to each other, like the US-$ and precious metals. Currencies play an essential role, as one might guess. Worldwide commodity trading is done in US-dollars, in other words, any fluctuation of the dollar will be reflected in local commodity trading centers.

Needless to say, that the current world financial crisis wouldn’t bypass the rubber industry. Slowing, stagnant, or falling consumer demand will lead to across-the-board decreases in demand for essential commodities for each respective industry. The auto industry is seeing almost unknown diminishing sales. The U. S. is the largest single market in the world, whether it is automobiles, garments, housing, or entertainment. So far, at least from what I can see, the U. S. market has been hit hardest, as might be expected from its being the cause of the crisis. It seems like the U.S. consumer has stopped buying. Only Wal-Mart and other discounters report increasing sales. The credit squeeze is a significant part of the problem. If the U. S. stops or reduces consumption the effects will be felt in China, India, and, yes, Cambodia.

Declining auto sales combined with more frugal driving will result in falling oil prices as supply exceeds demand. Speculators contribute their share when they only see doom on the horizon. One would have expected oil prices to fall 50% from its high of almost $150, but is now hovering in the $50 range, and some analysts see it at $40 within a month. The effect on the rubber industry is rather easy to see. Fewer autos built and sold - fewer tires will be needed. Synthetic rubber, the great competitor in several industrial applications and based on oil, suddenly becomes cheaper to produce. High oil prices led to the replacement of synthetic rubber by natural rubber. We are now seeing the opposite movement.

The rubber industry in Cambodia is now feeling the harsh realities of world economics. Cambodia had virtually no own marketing of its natural rubber products. Previously all its rubber was sold to Vietnam, which resold it to international markets. In the past few years, however, Chinese, Korean, Singaporean, and Taiwanese buyers stepped in. But all these countries are now suffering from their own economic woes.

The result for Cambodia is that latex prices fell from a high of KHR 11,000 to KHR 4,000 per kg. Crepe rubber of the CSK5L was down from $2,500 a ton to $1,600. That’s the bad news. The good news is buyers are still buying. But no one knows how long that will continue. Most of the harvest is brought in from September to January. After that there is a usually one-month long wintering season without any production. Some processing plants have already stopped buying intermittently to soften the impact and curtail supply. But they are heavily invested in machinery and have to make payroll. They can’t just leave their plant sit idle for long; likewise plantation owners, and mind you, most of the private plantations are small-holders. They may have recouped their initial investment in land, trees, fertilizer, etc., in previous years but a stoppage of tapping leaves them without income.

Depending on how lean their operation is many plantation owners are on the brink of profitability or losing money at the current prices already. The production of 1 kg of latex costs about $.60 to $.70, amortization of trees, equipment, etc. runs to about $.35. This does not include the cost of land assuming that the value will either appreciate over the lifetime of the plantation or stay the same. One can safely assume, however, that it will appreciate. I have never seen land anywhere that wouldn’t appreciate over a period of 35 years. The bottom line is that owners aren’t making money on those low prices.

The picture is not much different at the processing plants. One big problem for Cambodian plants is that they have to discount their prices heavily in order to stay competitive. They still have to play catch up with their international reputation. Even though the quality of most privately produced crepe rubber is equivalent to Thai, Malaysian, Vietnamese, or Indonesian rubber the long years of neglect in the last 25 years or so have left their mark. This combined with low market prices puts all processing plant owners in a very precarious position.


Older plant


Older plant


Older plant

CSK5L

It is, of course, not known how much reserves owners of both plantations and plants have built up over the last years but this will be crucial for their survival in the next few months. The question for both is whether or not they can endure a longer period of no income, or even losses. The wintering period lasts about 1 month, some take two months. During that period plantation owners still have to make payroll. Plant owners do not face this problem as they will have stockpiled crepe rubber for sale during these months. But with slowing demand the biggest stockpiles won’t help.

Investment in a processing plant starts at about $500,000 to $700,000 depending on capacity - $1.0 million is no rarity. I don’t know any plant owner that didn’t use their own money – so no loans, at least for the most part. That’s the bright side. They probably have enough reserves to ride it out for a few months. But the typical small-holder probably doesn’t. They will be hanging by their fingernails come January, February 2009. Whether they can survive will in large part depend on how quickly all those bail-out and kick-start programs by the U. S. and European governments will take effect.

The rubber exchanges in Asia moved in step with the stock-markets, more or less anyway, usually with a delay of a day or two. But neither stock nor commodity exchanges are a true reflection of reality. Hype in speculation may lead to a vast overpricing of a stock and result in an unrealistic market capitalization of those corporations, or on the opposite side, a ridiculous undervaluation of a manufacturer or bank. Stock exchanges rarely go any more by what the assets, liabilities, and profitability of a company is, which used to be the basis of the valuation of a company. Likewise the current price of rubber does not reflect the true picture as it relates to supply and demand, which by any economic standard should be the determining factor in finding a price of a commodity. No doubt, there is a current oversupply. But would that oversupply lead to a 50% and more price drop? I don’t think so. Equally without doubt, the current price levels include a certain psychological deduction. How much? Hard to say – this is an intangible, and who can really assess intangibles.

So now what are the prospects of natural rubber in the short and medium term then? On the upside, automobiles will still be built. They will be built in increasing numbers, make no mistake about that. They just won’t be so big and will be more fuel-efficient. Even if they didn’t burn gasoline any more, they would still need tires. Fortunately, there is no replacement for tires. And natural rubber will remain to be the main ingredient as studies and tests have shown that fully synthetic rubber tires are not nearly as rugged, resilient, and wear-resistant as natural rubber tires. Other automobile related parts, motorcycles, and bicycles are another important segment of rubber-based industries. Then there is the huge medical industry throughout the world. Just think latex gloves and medical equipment and you are looking at a steadily rising demand. Fully two-thirds of the world population has little or no medical care. Health care will be one future growth industry in decades to come. Additionally, oil prices – again, oil being the basis for synthetic rubber – will stabilize at a sustainable level. Analysts say this will be around the $50 to $60 per barrel mark. Rubber saw an upswing even when oil prices were at $30. So consequently, there is no reason to believe that a natural product, which replenishes itself, as opposed to oil, is bound for extinction in a multitude of applications.

Well, this is the grand picture, but what about the next few months up to one year?

All the economic pundits say that this recession will last more than 12 months, but that doesn’t mean it won’t recover sooner. In order to avoid massive layoffs auto manufacturers, and these are the most visible and significant players and, therefore, will have a great psychological impact, need to get on a sound footing again and start selling their cars. Consumers need to start spending again. This can only happen when the banking crisis is under control and all those bail-out plans are in place and working. Once this has been accomplished, and these programs simply must be implemented, and the first results become visible, this will most likely also signify the end of the current low rubber prices. I don’t think they can go much further down than at present.

The wintering season will help bring down stockpiles. Additionally, the first months in the harvesting cycle aren’t as productive as the second half. Thailand and Vietnam have signaled reduced production on account of the current market situation. There are reports that many a small-holder will stop operating their plantation next season. This will all lead to a leveling-off of the natural rubber supply in international markets, eventually leading to a stabilization of prices. Don’t expect an increase to over KHR 6,000/ kg the entire next year, though. Only 2010 will possibly see a slight increase to prices higher than that. But don’t hold your breath. What used to be a sure bet 10 or 20 years ago is no longer true now. Now nobody can see more than three to 6 months ahead, everything else is just like reading tea leaves. All those highly paid analysts are wrong 98% of the time. So the best thing an owner can do is build reserves, never a bad thing, and ride it out. Better times are sure to come. If they can go without profits for a year, they’re probably ok. If they can’t, perhaps they should start looking for other sources of income. But if you can, don’t sell your land – the market is down as we all know, so you would lose twice. Another cash crop might be the way to go, but that would be a subject for another time.
All in all, I believe the next 9 months will be tough, but as always there is a silver lining on the horizon, even for us rubber people.

I am the owner and co-owner of rubber plantations in Cambodia.

Yours truly KJE

Now What?

Normally, I don’t touch gossip subjects. But this one sort of stands out; that’s why I thought I might give this one an airing on my blog as well. We are talking about the baffling case of a young woman who calls herself DJ Ano. Her real name doesn’t really matter here.

This young woman works as a music show host on one of the Khmer TV stations, from what I understand. I don’t watch these shows and am generally completely uninterested in celebrities, so I don’t know about her. First time she appeared on my radar screen was when one blog reported her as missing – naturally, as a blogger I read a few other blogs about Cambodia. They had obviously picked it up either from a Khmer language paper or from another blog. But it did eventually appear in at least one paper that I know of – the Isle of Peace (Koh Santhepeap). My wife reads this so I am somewhat abreast of what’s reported there.

First they all wondered where she might have gone because it was initially dealt with as a ‘simple’ disappearance. But slowly it developed into a major story of a love triangle. These are all too common in Cambodia, just like in any other country of the world. It is, of course, not so remarkable that only those involving people in power and young female celebrities get wide press and blog coverage. And what’s not all too common in other countries outside SE Asia is that it all too often happens that the jealous wife of the husband takes matters to terminate this affair in her own hands by throwing acid into the female lover’s face, which leaves her horribly disfigured, or even by having her killed. There are at least three cases where this happened but no one was ever apprehended or let alone stood trial for any of these horrible crimes. Needless to say, that the rumor mills are still in full spin over all these cases.

The next report about this disappearance a few days later then contained some gory details of a purported crime. It was said that two goons abducted the young woman in broad daylight, threw her in a car and took her to a place where they shaved her head with a razor and then proceeded to inflict razor cuts all over her upper body, 83 in all, it was reported. The blogs were full of it. It also came to light that her pubic hair was shaved off and wounds inflicted on the genital area. Now who could be blamed for such a crime? Clearly, only a jealous wife of a high-ranking official could be responsible for such a heinous act.

When the press checked with the police, the response was there is no report of such an incident, consequently, there is no reason to investigate. This was quickly seen as part of a cover-up by the public. It was clear to them that the husband just threw a blanket over the affair in order to preserve his wife’s and his reputation and standing, not to mention to cover up a crime. Coincidentally, the police commissioner for Cambodia, Hok Lundy, who didn’t really enjoy the best of reputations among rights activists, died in a helicopter crash a few days later.

Now that set the rumor mill spinning so quickly it virtually span out of control. The wildest theories were explored, e. g. he was the husband, and now supporters or fans shot down his helicopter. Others said there were even pictures and videos in circulation showing the act. That material would also identify the wife. Everybody can imagine how those freakish minds went into overdrive.

On one board a poster even quoted 20 or so witnesses to the crime, who unfortunately were too afraid to come forward. But they knew who was behind all this.

One poster said, ‘Well, the bitch knew what she was getting into with a married power broker.’ – A bit crass this, don’t you think?

The young woman was reportedly transported to the Calamette Hospital in Phnom Penh, but because of the severity of the wounds she was quickly flown by helicopter to Ho Chi Minh City for intensive care. Status reports from an unidentified hospital there followed, giving the situation as grave but not hopeless. Some had her in a life-threatening condition. The unnamed hospital later published a bulletin that she was on the way to recovery and would be released in a few days. No one ever saw that bulletin, let alone could say with any degree of certainty which hospital they were talking about.

On another blog someone posted a comment saying that the young woman is fine and will return to the public eye shortly. She, the poster, claimed to be a close relative of hers.

Another newspaper article again quoted the police as saying there is no grounds for an investigation because no one filed a missing persons report, there is not one shred of evidence indicating that such a crime had been committed, although the police stated they had also heard of those rumors but dismissed them as just that. Not even her employers at the TV station saw the need to file a report. Perhaps she was just on vacation and the producer just didn’t want to bother with all these rumors or saw a good publicity stunt in the making, all without lifting one finger or a phone?

The police can’t act on rumors alone, unless it is in the public interest. A missing person that has not been reported missing is not dealt with by any police force in the world, or is it?

One zealous blogger wrote an open letter to the police demanding they investigate. Incidentally, he also implicated the late police commissioner in the crime. This blogger is a particularly vexatious individual who obviously considers himself a hard-core journalist the way he publishes his contributions on several blogs. He keeps admonishing the Cambodian government about what it must do. I am sure they read his blog with great interest.

Now, then one day after two weeks or so, lo and behold, the young woman appeared on her TV show alive and unscathed. But some people just wouldn’t let it go. They indicated, hey, this is a doppelganger (dead ringer). The young woman then put out a press release saying she doesn’t know what prompted anyone from circulating those rumors. Nothing ever happened and she will sue anyone who continues spreading these falsehoods about an affair, etc.

Now what happened? I mean, who the hell really cares? But this is a glowing example of how our new information dissemination via blogs, you-tube, etc. can run amok. One can’t really blame those bloggers on the one hand as they oftentimes do uncover facts otherwise kept hidden. But even the New York Times fell victim to some blogged falsehoods. On the other hand this case exemplifies very clearly how pernicious an effect an even initially small rumor can have when it mushrooms into a major story with possibly uncontrollable consequences, and often to the detriment of the purported victim – and nothing beats a story or rumor with such prurient salaciousness. Sure, in this case the young woman got a lot of publicity, whether good or bad is arguable, but the often noticed tendency to blow things out of proportion is a deplorable and rather unwelcome side product of our web-dominated information highway.

Read This

There were two articles in the Phnom Penh Post today bolstering my previous assertions about the real estate market in Cambodia.

And another one on who is suffering the most from the downturn in construction.


In case you don't read the Post you should because they are still the best when it comes to English-language papers in Cambodia.